Bad Customer Service as a Profit Center

There was a December article in Fast Company that spelled out what I’ve long suspected – that many big companies have lousy customer service on purpose – they want to make it hard for customers to get refunds or to drop service. The article was written by Anthony Dukes of USC and Yi Zhu of the University of Minnesota. The article is worth reading if you have the time to click through all of the links, which elaborate numerous ways that big companies abuse their customers.

This certainly rings true for the big ISPs. I harken back to the days of AOL, which was famous for making it a challenge to drop their service. Comcast has always had a reputation of making it hard for customers to break a bundle or leave the company for another ISP.

The article cites some interesting statistics. They claim that in 2013 that a study showed that the average home spent 13 hours per year disputing charges with customer service. That’s nearly two workdays of time, and it’s little wonder that people hate to call customer service.

Customer service at the big telcos and cable companies was never great, but in my time in the industry it’s gotten worse – the big ISPs are now rated at the bottom for customer satisfaction among all corporations. I think the big change in the industry came in the last few decades when the big ISPs got enamored with win-back programs – offering customers incentives to stop them from dropping service. Unfortunately, the ISPs tied employee compensation to the percentage of win-backs and there have been numerous articles published of ISP employees who would not let somebody drop service and who would keep a customer on the phone for an hour to convince them not to leave.

ISP customer service also took a downward spin when every call with a customer turned into a sales call trying to sell more services. Unfortunately, these sales efforts seem to result in new revenues, but it’s irksome to customers to have to listen to several sales pitches to accomplish some simple customer service task.

Dukes and Zhu claim that a lot of customer service centers are structured to dissuade customers from dropping service. They say that long hold times are on purpose to get customers to give up. They cite some customer service centers where the people answering the first call from customers have no authority to change a customer’s billing – only customers willing to fight through to talk to a supervisor have a chance at fixing a billing problem. They claim that chatbots are often set up in the same way – they can sound helpful, but they often can’t make any changes.

They also believe that companies are getting sophisticated and use different tactics for different customers. Studies have shown that women get annoyed faster than men in dealing with poor customer service. Research has shown that some demographics, like the elderly, are easier to dissuade from getting a refund.

Smaller ISPs understand the poor customer service from the big ISPs and most of them strive to do better. However, I know of smaller ISPs with aggressive win-back programs or who use every call as a marketing opportunity, and such ISPs have to be careful to not fall into the same bad habits as the big ISPs.

I find it amusing that one of the many reasons cited for breaking up the Bell System was to improve customer service. Regulators thought that smaller regional companies would be nimbler and do a better job of interacting with customers. This turned out not to be true. In fact, I consider my interactions with monopolies to be the easiest. I can’t recall a call I’ve ever had with an electric or water utility that wasn’t completed quickly and efficiently. Perhaps ISPs ought to strive to be more like them.

Why Big ISPs Screw Up

I was recently joking with a colleague about some of the really dumb things that some of the big ISPs do – those things that get negative press or that make customers permanently dislike them. But after thinking about it a bit, it struck me that bad behavior by the big companies is almost inevitable – it’s a challenge for a big company to not behave badly. I can think of a number of reasons for the poor decisions that big ISPs seem to repeatedly make.

Good Intentions but Bad Policies. Some of the ugliest stories in the press from our industry have come from Comcast customer service. Customers have recorded customer service representatives saying some of the most awful things. Comcast executives have often been quoted as saying that they want to do a better job of customer service and the company has thrown big bucks at the issue over the last decade to try to improve.

But Comcast has corporate policies that undo all of their good intentions. Some of the most memorable press stories came from customer service reps who are compensated for stopping customers from disconnecting service or for upselling additional services to customers. Win-back programs and upselling are good for the Comcast bottom line, but they tempt poorly paid customer service reps into saying anything to stop a customer from disconnecting or entice a customer service rep to sneak unwanted products onto a customer’s bill. The bottom line is that policies that promote good behavior go out the window when employees are compensated for bad behavior.

Decentralized Management. I remember reading last year about the big push at Verizon to bring all of their fiber assets under one regime. The company built fiber over the years under a lot of different business units and there has been no centralized fiber inventory. This has to have cost Verizon a fortune over the years with lost revenue opportunities on fiber that already exists. An outsider like me looks at this and wonders why something this common sense wasn’t done fifteen years ago. Unfortunately, the poor communications inside the company is a natural consequence of operating different business units, each in silos. The FiOS folks never knew what the enterprise or the cellular folks were doing, and so the company frittered away the huge synergies that could have been gained by making all fiber available to all business units. We’ve seen attempts at the big ISPs to make the kind of consolidation Verizon is doing, but if they aren’t careful, in time they’ll slip back to the old bad practices.

No Emphasis on Being Good Corporate Citizens. I worked at Southwestern Bell pre-divestiture. There were some negative sides from being a giant monopoly,  but the company also put a lot of effort into instilling the message internally that the company had a nationwide mandate to do a good job. The company constantly extolled its accomplishments to employees and effectively indoctrinated them into being good citizens. I happened to sit close to the person who took ‘executive’ complaints – complaints from customers that had escalated to upper management. The company made a legitimate effort to deal with every problem that made it that high in the company. Employees were rewarded for loyalty and good behavior with lifetime jobs – phone company people were joked to have bell-shaped heads.

Big ISPs no longer promise jobs for life and working at a big ISP today is just a job. I know a mountain of people who currently work for the big ISPs and none of them have that same esprit de corps that was normal at Ma Bell.

Quarterly Profit-Driven. A lot of the problems I see from the big ISPs come from the modern emphasis on quarterly earnings. This emphasis permeates down into the ranks of management at an ISP. For example, a department head might decide to not make a major repair or upgrade if it causes a blip in the department’s budget. The constant drive for quarterly earnings improvements drives ISPs to lay-off needed technicians to meet an earnings goal. It drives companies to raise rates even when they haven’t increased costs. It makes companies chase new shiny ideas like 5G even if the technology is half-baked and premature. Unfortunately, Wall Street matters more than both employees and customers – and it shows.